Cap Rate Calculator
Estimate what a property is worth from the income it earns. Divide its yearly net operating income by the cap rate the market uses for similar properties.
- Free
- Works offline after your first visit
- Saves on this device
- No sign-up
- Updated
How it works
Value is net operating income divided by the cap rate, with the cap rate written as a decimal. A higher cap rate gives a lower value for the same income.
Net operating income is income after running costs but before the mortgage. Cap rates come from local sales of similar properties, so check the current market.
Worked example
A property earning $30,000.00 a year in net operating income, at a market cap rate of 6%, is worth about $500,000.00.
Questions
Where do I find a cap rate?
Local brokers and appraisers track cap rates from similar sales. Ask one for the figure for your area and property type.
Why does a higher cap rate lower the value?
The same income is worth less when buyers want a higher return on it.
Is this an appraisal?
No. It is a rough estimate from income alone. An appraisal looks at many more factors.
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